Retail

Mid-market retailers at risk of becoming “stale”: Report

Max Stainkamph /

Medium size Australian retailers are at risk of becoming “stale”, according to research published this month that the mid-market is under pressure from both smaller domestic retailers and larger international brands.

The report from KordaMentha also found late adoption of online technology is hitting Australian retailers hard, with wholesalers one group that is likely to be cut out of the supply chain.

Andrew Malarkey, the author of the “Fashion retailing and wholesaling in Australia” report, says local retailers need to “lift their game” after years “in denial” on the threat of online.

Malarkey says recent moves into the Australian market by larger overseas companies have given consumers “a taste of what international retailers can offer”.

“The Australian retail market was fairly closed, and wasn’t aware of what was going on overseas,” Malarkey told SmartCompany.

“The positive thing is they’ve now woken up to that threat and are taking steps to address it.

“Australia’s retail and footwear sales have had a slow year, growing just 0.2% during April, following 0.4% growth in March, and falling short of forecasts.

“Global economic conditions are expected to improve gradually and industry growth is projected to remain constrained over the next five years.”

The report says the market’s short-term outlook is “continued disruption”, mainly from “new technologies and innovative competition”, but Malarkey says that’s good news for smaller businesses.

“Smaller businesses are focusing on a niche market. They’re small and their nimble and can adjust to what consumers want.”

“They have a clear vision, know their customers and get products that aren’t available elsewhere.”

He says small retailers’ ability to turn over stock is a huge asset over medium sized outlets, which are at risk of becoming “stale”.

“Customers want the latest trends now, they want to be able to walk into a store and have different stock to what they had two months ago,” Malarkey says.

“This is what medium sized retailers are struggling with.”

Malarkey says Australian businesses can also draw inspiration from Spanish brand Zara, which is now a giant earning four times as much as average competitors but still runs like a startup.

“A lot of small retailers can copy or learn from Zara and the way they’ve innovated a new supply chain,” Malarkey says.

“Could a small Australian business become the next Zara? Probably not, but they could learn how to take a completely different path to the norm.”

“There are many more paths left unexplored.”

However, Malarkey says the main casualties over the short term are medium sized businesses don’t have the flexibility or the funds of larger department stores such as David Jones or Myer.

“The giants are rapidly restructuring their businesses to be more competitive and investing in new technologies,” he says.

“Medium businesses will struggle.”

The report says online shopping will also play a part in this, predicting “wholesale bypass and internet shopping will become more popular, shutting wholesalers out of the supply chain” if recent trends continue.

“Online models of e-retailing are proliferating, and some of these are particularly relevant to wholesalers looking to deal directly with consumers,” the report says.

“In particular, third party marketplaces are become an increasingly important driver of growth for online retailers.”

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